Gas Production Hit All-Time High In April

Fifty-five rigs are now operating in the Bakken, and just under 20 hydraulic fracturing crews — but the latter are not enough to keep up with the former.

Oil prices are no longer the thing holding Bakken oil production back, Department of Mineral Resources Director Lynn Helms said during June’s monthly oil production report. The limiting factor right now is the Bakken’s continuing labor crunch, a labor crunch that by and large continued throughout the recent downturn in oil and gas, but is intensifying now that the sector is trying to ramp back up.

“The drilling rigs are outrunning the frack crews,” Helms said. “The industry’s intent was to get to 25 crews this year, but we are well short of that. They are below 20. They are really struggling to hire qualified people.”

Oil production likely to stay above 1 million barrels per day

Helms said many of the Bakken’s oilfield workers took jobs in Oklahoma and Texas, which ramped up a little faster than North Dakota.

Helms expects the number of drilled but uncompleted wells to rise as a result, though he said with the number of rigs and hydraulic fracturing crews running, he no longer expects oil production to fall below a million barrels a day.

June’s report puts April oil production at 1,050,630 barrels per day and gas production at 1,832,308 mcf per day — the latter of which is a new all-time high.

Despite a nearly 6 percent rise in gas production, however, flaring captures remained on target, Helms said. Everywhere, that is, except Fort Berthold, where there have been delays in projects essential to gas capture.

That is a problem he said the state of North Dakota is working on with Interior Secretary Ryan Zinke, to see how the process can be improved.

“I’ve laid it out in a document for Gov. Burgum, all the steps you have to go through, and he shared that with Secretary Zinke last week,” Helms said. “We are going to do what we can to help Secretary Zinke straighten that out.”

There are 11,746 wells producing, 1,971 of which are from legacy, conventional pools.

Permitting for April was 58, falling from April’s 93, but Helms believes uncertainty in the labor market was a factor in that. Without enough hydraulic fracturing crews to go around, there’s less incentive to go to the expense of permitting.

“As you can see from the numbers, it’s pretty much happy, happy, happy,” he said. “Production increases on the oil side are just under 25,000 barrels per day, which is a 2.4 percent increase. That’s more than many of us expected.”

Even though there aren’t enough hydraulic fracturing crews to go around, Helms does not believe that will cause production to fall below a million barrels again.

“I think we are going to skate by,” he said. “We could get a harsh winter. That would be a real test. That’s the one thing that could push below — that or a big drop in prices.”

Helms acknowledged the market was disappointed in OPEC’s production cuts, but the industry is moving ahead.

“Industry appears confident that the fundamentals are there, regardless of what we are seeing terms of oil prices,” he said. “Inventories are going to come down, the OPEC cuts are going to do their jobs.”

One head scratcher on the market, however, has been that North Dakota Sweet crude has stayed at $35.50 even with Dakota Access now up and running for a dozen or so days now.

“Competition doesn’t appear to have kicked in there yet to cause that Flint Hills North Dakota Sweet crude price to come back up to WTI like one would expect,” he said.

As more barrels move on Dakota Access, however, Helms anticipates the differential will ease.

Gib Knight is a private oil and gas investor and consultant, providing clients advanced analytics and building innovative visual business intelligence solutions to visualize the results, across a broad spectrum of regulatory filings and production data in Oklahoma and Texas. He is the founder of OklahomaMinerals.com, an online resource designed for mineral owners in Oklahoma.

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